Section 115O - Tax on distributed profits of domestic companies - Income-tax Act, 1961

1 [Chapter XII-D Special provisions relating to tax on distributed profits of domestic companies Tax on distributed profits of domestic companies. 115-O. 2 [ (1) Notwithstanding anything contained in any other provision of this Act and subject to the provisions of this section, in addition to the income-tax chargeable in respect of the total income of a domestic company for any assessment year, any amount declared, distributed or paid by such company by way of dividends (whether interim or otherwise) on or after the 1st day of April, 2003 18 [ but on or before the 31st day of March, 2020 ] , whether out of current or accumulated profits shall be charged to additional income-tax (hereafter referred to as tax on distributed profits) at the rate of 3 [ fifteen ] per cent. ] 15 [ Provided that in respect of dividend referred to in sub-clause (e) of clause (22) of section 2, this sub-section shall have effect as if for the words fifteen per cent. , the words thirty per cent. had been substituted;] 6 [ (1A) The amount referred to in sub-section (1) shall be reduced by,- 11 [ (i) the amount of dividend, if any, received by the domestic company during the financial year, if such dividend is received from its subsidiary and,- (a) where such subsidiary is a domestic company, the subsidiary has paid the tax which is payable under this section on such dividend; or (b) where such subsidiary is a foreign company, the tax is payable by the domestic company under section 115BBD on such dividend: Provided that the same amount of dividend shall not be taken into account for reduction more than once; ] (ii) the amount of dividend, if any, paid to any person for, or on behalf of, the New Pension System Trust referred to in clause (44) of section 10. Explanation .- For the purposes of this sub-section, a company shall be a subsidiary of another company, if such other company, holds more than half in nominal value of the equity share capital of the company. ] 12 [(1B) For the purposes of determining the tax on distributed profits payable in accordance with this section, any amount by way of dividends referred to in subsection (1) as reduced by the amount referred to in sub-section (1A) [hereafter referred to as net distributed profits], shall be increased to such amount as would, after reduction of the tax on such increased amount at the rate specified in sub-section (1), be equal to the net distributed profits.] 16 [ Provided that this sub-section shall not apply in respect of dividend referred to in sub-clause (e) of clause (22) of section 2.] (2) Notwithstanding that no income-tax is payable by a domestic company on its total income computed in accordance with the provisions of this Act, the tax on distributed profits under sub-section (1) shall be payable by such company. (3) The principal officer of the domestic company and the company shall be liable to pay the tax on distributed profits to the credit of the Central Government within fourteen days from the date of- ( a ) declaration of any dividend; or ( b ) distribution of any dividend; or ( c ) payment of any dividend, whichever is earliest. (4) The tax on distributed profits so paid by the company shall be treated as the final payment of tax in respect of the amount declared, distributed or paid as dividends and no further credit therefor shall be claimed by the company or by any other person in respect of the amount of tax so paid. (5) No deduction under any other provision of this Act shall be allowed to the company or a shareholder in respect of the amount which has been charged to tax under sub-section (1) or the tax thereon. 4 [ (6) Notwithstanding anything contained in this section, no tax on distributed profits shall be chargeable in respect of the total income of an undertaking or enterprise engaged in developing or developing and operating or developing, operating and maintaining a Special Economic Zone for any assessment year on any amount declared, distributed or paid by such Developer or enterprise, by way of dividends (whether interim or otherwise) on or after the 1st day of April, 2005 out of its current income either in the hands of the Developer or enterprise or the person receiving such dividend 5 [ *** ]]. 7 [Provided that the provisions of this sub-section shall cease to have effect from the 1st day of June, 2011.] 13 [(7) No tax on distributed profits shall be chargeable under this section in respect of any amount declared, distributed or paid by the specified domestic company by way of dividends (whether interim or otherwise) to a business trust out of its current income on or after the specified date: Provided that nothing contained in this sub-section shall apply in respect of any amount declared, distributed or paid, at any time, by the specified domestic company by way of dividends (whether interim or otherwise) out of its accumulated profits and current profits up to the specified date. Explanation .-For the purposes of this sub-section,- (a) specified domestic company means a domestic company in which a business trust has become the holder of whole of the nominal value of equity share capital of the company (excluding the equity share capital required to be held mandatorily by any other person in accordance with any law for the time being in force or any directions of Government or any regulatory authority, or equity share capital held by any Government or Government body); (b) specified date means the date of acquisition by the business trust of such holding as is referred to in clause (a).] 14 [(8) Notwithstanding anything contained in this section, no tax on distributed profits shall be chargeable in respect of the total income of a company, being a unit of an International Financial Services Centre, deriving income solely in convertible foreign exchange, for any assessment year on any amount declared, distributed or paid by such company, by way of dividends (whether interim or otherwise) on or after the 1st day of April, 2017, 17 [ out of its current income or income accumulated as a unit of International Financial Services Centre after the 1st day of April, 2017 ] , either in the hands of the company or the person receiving such dividend. Explanation .-For the purposes of this sub-section,- (a) International Financial Services Centre shall have the same meaning as assigned to it in clause (q) of section 2 of the Special Economic Zones Act, 2005; (28 of 2005) (b) unit means a unit established in an International Financial Services Centre, on or after the 1st day of April, 2016; (c) convertible foreign exchange means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Management Act, 1999 (42 of 1999) and the rules made thereunder. ] ******************** Notes :- 1. Chapter XII-D, consisting of sections 115-O to 115Q, inserted by the Finance Act, 1997, w.e.f. 1-6-1997. 2. Substituted by the Finance Act, 2003, w.e.f. 1-4-2003. Prior to its substitution, sub-section (1), as amended by the Finance Act, 2000, w.e.f. 1-6-2000, Finance Act, 2001, w.e.f. 1-6-2001 and Finance Act, 2002, w.e.f. 1-4-2003, read as under : (1) Notwithstanding anything contained in any other provision of this Act and subject to the provisions of this section, in addition to the income-tax chargeable in respect of the total income of a domestic company for any assessment year, any amount declared, distributed or paid by such company by way of dividends (whether interim or otherwise) on or after the 1st day of June, 1997 but on or before the 31st day of March, 2002, whether out of current or accumulated profits shall be charged to additional income-tax (hereafter referred to as tax on distributed profits) at the rate of ten per cent. 3. Substituted for twelve and one-half by the Finance Act, 2007, w.e.f. 1-4-2007. 4. Inserted by the Special Economic Zones Act, 2005, w.e.f. 10-2-2006. 5. Words not falling under clause (23G) of section 10 omitted by the Finance Act, 2006, w.e.f. 1-4-2007. 6. Substituted vide Finance (No.2) Act, 2009, w.e.f. 1-4-2009, before it was Inserted by Finance Act, 2008, w.e.f. 1-4-2008. as, (1A) The amount referred to in sub-section (1) shall be reduced by the amount of dividend, if any, received by the domestic company during the financial year, if (a) such dividend is received from its subsidiary; (b) the subsidiary has paid tax under this section on such dividend; and (c) the domestic company is not a subsidiary of any other company: Provided that the same amount of dividend shall not be taken into account for reduction more than once. Explanation .-For the purposes of this sub-section, a company shall be a subsidiary of another company, if such other company holds more than half in nominal value of the equity share capital of the company . 7. Inserted vide Finance Act, 2011 w.e.f. 1.6.2011 8. Inserted vide Finance Act, 2012, w.e.f. 01-07-2012. 9. Substituted vide Finance Act, 2012, w.e.f. 01-07-2012., before it was read as:- paid tax under this section on such dividend; and 10. Omitted vide Finance Act, 2012, w.e.f. 01-07-2012., before it was read as:- (c) the domestic company is not a subsidiary of any other company: 11 . Substituted vide Finance Act, 2013, w.e.f. 1st day of June, 2013 , before it was read as : (i) the amount of dividend, if any, received by the domestic company during the financial year, if- (a) such dividend is received from its subsidiary; 8 [ and ] (b) the subsidiary has 9 [ paid the tax which is payable under this section on such dividend ] : (c) 10 [*****] Provided that the same amount of dividend shall not be taken into account for reduction more than once; 12. Inserted vide THE FINANCE (No. 2) ACT, 2014 w.e.f. 1st day of October, 2014 13. Inserted vide THE FINANCE ACT, 2016 w.e.f. 1st day of June, 2016 14. Inserted vide THE FINANCE ACT, 2016 w.e.f. 1st day of April, 2017 15. Inserted vide THE FINANCE ACT, 2018 16. Inserted vide THE FINANCE ACT, 2018 17. Substituted vide FINANCE (NO. 2) ACT, 2019 w.e.f. 01-09-2019 before it was read as out of its current income 18. Inserted vide Finance Act, 2020 dated 27-03-2020 w.e.f. 01-04-2021